Regulators dismantled New Jersey's largest savings and loan - City Federal Savings Bank - in transactions that may cost taxpayers $1.5 billion, the second most expensive thrift bailout yet.
The Resolution Trust Corp. said it sold 27 Florida branches of City Federal, based in Somerset, N.J. to Great Western Bank of Beverly Hills, Calif., and nine Camden, N.J.,-area branches to First Fidelity Bank of Burlington, N.J.The government will keep and operate the remaining 66 branches in New Jersey while it seeks a buyer.
The agency, which announced the deals late Friday, estimated the ultimate cost of the City Federal bailout, after the remaining branches are sold, will be $1.5 billion. CenTrust Savings Bank of Miami, which the agency handled in June, cost an estimated $1.7 billion.
Eventually, Lincoln Savings and Loan Association of Irvine, Calif., which is still under government control, is expected to cost the taxpayers $2 billion, analysts say. However, the Resolution Trust Corp. has not yet estimated the cost for that bailout.
On Friday, a Superior Court judge in Los Angeles refused to lower the $5 million bail for Lincoln operator Charles H. Keating Jr., who was jailed Tuesday after the unsealing of a 42-count criminal indictment.
Also on Friday, the federal government filed a lawsuit seeking $200 million in damages against former officers and directors of Silverado Banking, Savings and Loan Association, including Neil Bush, the president's son.
The City Federal deals still leave the insolvent thrift largely unresolved. Great Western is paying $9.75 million to take over $938 million in deposits while First Fidelity is paying $9.1 million to take over $468 million in deposits.
The two acquirers also will purchase about $1.1 billion in loans. The trust corporation is retaining $8.2 billion in City Federal loans and other assets and will continue to be responsible for $7.2 billion in deposits and other liabilities.
City Federal, which was seized by the government in December, got into trouble with large commercial real estate and construction loans in Florida, New Jersey and Texas.
According to analysts, two of the biggest problem projects were Grant Harbor, a condominium development in Vero Beach, Fla., and Port Liberte, a $750 million luxury condominium project in Jersey City, N.J., on the New York Harbor modeled after Port Grimaud on the French Riviera.